This has probably been one of the most challenging year of most of our lives. The devastating economic collapse caused by the COVID-19 pandemic presents a once-a-generation challenge. No one can predict what a recovery will look like, so right now everyone \u2013 including the trucking and transportation sectors \u2013 is playing a guessing game trying to figure out the particulars of what an economic recovery will look like. <\/p>\n\n\n\n
<\/p>\n\n\n\n
<\/p>\n\n\n\n
Many industry advocates and business organizations are\nalready making predictions. In fact, according to industry forecaster FTR, we\nmay not see normality return to the transportation sector until 2022 at the\nearliest. Certainly, the last half of this year is out and even 2021 is in\nquestion right now. No matter what, many believe that there will be permanent,\nlasting damage to not just the U.S. economy, but to the global economy. <\/p>\n\n\n\n
Even in the best of times, predicting an economic recovery\nis not easy. And to make matters worse, there is no current historical\nrecession that is comparable to what the nation is going through right now. A\n30% drop in economic activity simply has no precedent. In the end, the economy\nwill be driven by the virus itself and how the country responds to it, which,\nright now, is not good. <\/p>\n\n\n\n
This comes on the back of a huge economic boom. Consider\nthat in January, many pundits had a far different outlook on how this year\nwould turn out. The reality of what has happened has caught everyone off guard.\nWe went from record levels of U.S. employment to where we are today. The\nwhiplash is quite extreme. The economy had a lot of positives going for it, but\nall that has now come crashing down. <\/p>\n\n\n\n
And the big difference here is in the type of recession we\nare in. Rather than a recession caused by an economic collapse, we have\nsuffered an economic collapse caused by a natural disaster. But does one beget\nthe other? Many are already under the impression that a depression is just\naround the corner. And could multiple virus waves cause recurring economic\ndestruction? <\/p>\n\n\n\n
The State of Transportation<\/strong><\/p>\n\n\n\n Even with trucking operating as an essential service during\nthe pandemic, delivering much needed medical supplies, food, and other\nnecessities, trucking feels the pain. Not only did U.S. GDP drop by 32.9% in\nthe second quarter, but the goods transportation sector dropped 42.2%. This\nrepresents a huge pit that trucking companies must extricate themselves out of.\nFor many smaller operators, the task might simply be too large. Bankruptcies\nloom for many trucking companies. <\/p>\n\n\n\n Fortunately, not all hope is lost. The trucking sector is\nresilient and has made it through many crises. There still is no better way to\nget goods and services from one place to another than by truck. Some sectors\nare recovering from this disaster better than others. Dry van leads the way,\nwith reefers and flatbed loads coming in pretty close behind. <\/p>\n\n\n\n For better or worse, the trucking industry has endured\nsomething like this before. No matter the recession or economic downturn,\npeople need things delivered. And although you do see peaks and valleys in\ntrucking employment, for nearly a century the trucking industry has managed to\nweather storms like these better than others in the transportation sector. <\/p>\n\n\n\n As an example, not all sectors are recovering equally from\nthis current disaster. The rail sector is still sitting at rock bottom levels\nand waiting for a full restart of operations. Intermodal is somewhere in\nbetween the two. It has not fully recovered but has at least been picking up.\nUntil global commerce picks up, it is unlikely we will see big gains across\nevery industry in the transportation sector. <\/p>\n\n\n\n Fortunately, many are predicting a big third quarter bounce\nin GDP. We could see a 20% uptick, but we would still have a long way to go\nbefore we fully recover from the terrible 33% loss the nation suffered from in\nQ2. The question now is: What will the economic recovery look like? Who will\nthe winners and losers be?<\/p>\n\n\n\n The Economic Recovery<\/strong><\/p>\n\n\n\n The main problem with predicting the economic recovery is\nthe virus itself. No one can predict how the COVID-19 situation will play out.\nSo many questions remain. Before you even begin to consider the data and assume,\nyou must consider:<\/p>\n\n\n\n While it is unlikely we will see another huge drop like we\ndid in Q2, the economic recovery will be a slow, stuttering process, with\nperiods of plateaus as the virus works its way through the population. Some\nbelieve we may even see a bigger resurgence in the fall. <\/p>\n\n\n\n Either way, many do not think we will see shutdowns like we\ndid when the virus first appeared. While we may see certain regions and\nmunicipalities shut down to control specific outbreaks, we should be past the\nworst of the shutdown. It is also likely we will see tighter regulations at the\nstate level. The federal government is unlikely to regulate, but the states\nhave already begun to. <\/p>\n\n\n\n In addition to the fears of a second wave of the virus, some\ndo fear a second wave of layoffs as a second round of employment challenges\ncome to a head. With people moving around less, buying less, and saving more,\nmany businesses are feeling the squeeze. <\/p>\n\n\n\n The other problem lies in the demise of the U.S. Payroll\nProtection Act, which provided companies with a jolt of money to keep people on\nthe payroll. Now that this program has expired, the country may see more people\nlaid off as a result. Fortunately, many have built this assumption into their\nforecast. No matter the forecast, however, the pain is going to be deep. <\/p>\n\n\n\n The Lingering Effects<\/strong><\/p>\n\n\n\n Get ready for permanent changes to how business gets done.\nOffice buildings are largely empty with everyone working at home and companies\nhave taken notice. Overhead costs have dropped, and productivity is at an\nall-time high. For those who can work from home, the trend is likely to be\nsustained. This will have a knock-on effect in other industries.<\/p>\n\n\n\n Take people\u2019s driving patterns as one example. If even 20% of the current at-home workers stay home, you are talking millions of cars off the nation\u2019s roads and highways. Imagine what kind of impact that will have on the oil industry. It is highly likely we have reached peak oil and are on the full downslope now. You will see aircraft and vehicles retired at a record rate. <\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n With people working from home, expect to see an exodus from\ncity centers. You already hear of grumblings coming out of New York that the\ncity will never be the same. High-rise office buildings are like ghost towns.\nExpect to see this trend accelerate across the country. Commercial real estate\nwill be affected as businesses reduce their workplace footprints.<\/p>\n\n\n\n Work from home life for many will also result in an impact\non the housing sector, with more families potentially moving further from city\ncenters, but into larger homes to accommodate workspaces and more home time.\nThere could be ongoing changes to how education is delivered, with more online\nlearning.<\/p>\n\n\n\n E-commerce has been a hot topic in the trucking sector. With\nmore people buying stuff online, trucks are needed to keep warehouses stocked.\nLast-mile deliveries ensure people get what they ordered same-day in many\ncases. What we have essentially seen is a shift to an entirely new type of\nconsumer. What may have taken many years to develop has now happened in a few\nmonths. <\/p>\n\n\n\n Fortunately, many consider this to be the bottom. As people go back to work and spending rises, there should be a noticeable uptick in the fortunes of the trucking sector. Still, uncertainties remain. From the trade war with China to the upcoming election and unrest in the United States, who knows how this could all play out. <\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n In the end, trucking companies who are nimble and think\nahead will come out on top. While this crisis is unprecedented and has done a\nlot of harm, businesses can survive and even bounce back. The question is, how\ndo you plan to operate\nin a post COVID-19 world<\/a>?<\/p>\n","protected":false},"excerpt":{"rendered":"